<PAGE> 1
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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
FERRO CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FERRO CORPORATION
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
FERRO CORPORATION
1000 LAKESIDE AVENUE
CLEVELAND, OHIO 44114
March 19, 1998
DEAR SHAREHOLDERS:
You are cordially invited to attend the annual meeting of shareholders of
Ferro Corporation which will be held on Friday, April 24, 1998, in the Erie Room
at One Cleveland Center, 1375 E. 9th Street, Cleveland, Ohio. The meeting will
begin at 10:00 A.M., Cleveland time, but we hope that you will be able to join
the officers and directors at 9:30 A.M. for coffee and informal conversation.
The matters to be considered are described in the following pages and include
information concerning each director and each nominee for director.
The items proposed for action by the shareholders at the meeting are the
election of directors, approval of an amendment to the Articles of Incorporation
to increase the number of authorized shares of Common Stock from 150,000,000 to
300,000,000 and the designation of auditors. In addition, the officers will give
current reports on the status of the business of Ferro.
Shareholders of record at the close of business on February 24, 1998 are
entitled to vote at the meeting.
It is important to your interests that all shareholders participate in the
affairs of Ferro regardless of the number of shares owned. Accordingly, we urge
you promptly to fill out, sign and return the enclosed proxy even if you plan to
attend the meeting. You have the option to revoke it at any time prior to the
meeting, or to vote your shares personally on request if you attend the meeting.
Very truly yours,
ALBERT C. BERSTICKER, Chairman
and Chief Executive Officer
<PAGE> 3
PROXY STATEMENT
ELECTION OF DIRECTORS
The Board of Directors of Ferro consists of twelve members currently and
will be reduced to ten members upon the retirement of Paul S. Brentlinger and A.
James Freeman prior to the annual meeting. The Board of Directors is divided
into three classes, and the directors in each class are elected for terms of
three years so that at each annual meeting the term of office of one class of
directors expires. The terms of office of three directors of Ferro will expire
on the day of the 1998 annual meeting, upon election of successors.
Proxies solicited hereunder granting authority to vote on the election of
directors will be voted for the election of Albert C. Bersticker, Michael H.
Bulkin and William J. Sharp to serve for three year terms and until their
successors are elected; provided, however, that if the election of directors is
by cumulative voting (see page 28 of this Proxy Statement) the persons appointed
by the accompanying proxy intend to cumulate the votes represented by proxies
they receive and distribute such votes in accordance with their best judgment.
All of the candidates for election as directors are directors whose present
terms of office will expire at the meeting.
If any nominee is not available at the time of the election, proxies will
be voted to decrease the authorized number of directors. However, Ferro has no
reason to believe that any of the nominees will not be available.
Information is set forth below regarding the principal occupation and the
number of shares of Ferro Stock owned on February 24, 1998 by each nominee and
each of the other directors who will continue in office after the meeting.
Disclosure throughout this Proxy Statement with respect to shares of Common
Stock, shares of Common Stock underlying stock options, and shares of Common
Stock awarded under the Performance Share Plan gives effect to the three-for-two
split of Ferro's Common Stock for shareholders of record on November 14, 1997.
1
<PAGE> 4
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION
<C> <S>
ALBERT C. BERSTICKER, age 63, Chairman and Chief Executive
BERSTICKER PHOTO Officer of Ferro. Mr. Bersticker began his career as a
Research Engineer with Ferro in 1958. Following various
DIRECTOR SINCE 1978 assignments with the International Division, he became Plant
Manager of the Company's Spanish subsidiary and was named
Managing Director of Ferro Spain in 1969. Returning to the
United States in 1973, Mr. Bersticker was named Assistant to
the Group Vice President -- International Operations. In
1974 he was appointed Group Vice President -- International;
was named Executive Vice President, Operations in 1976; was
named Executive Vice President and Chief Operating Officer
in 1986; was named President and Chief Operating Officer in
1988; was named Chief Executive Officer in 1991; and was
named Chairman in 1996. Mr. Bersticker is also a Director of
KeyCorp (bank holding company), Oglebay Norton Company
(minerals and shipping) and Brush Wellman Inc. (manufacturer
of beryllium alloy parts).
Common Shares owned 595,412(1) Nominee for term
expiring in 2001
ESOP Convertible Preferred Shares beneficially owned 3,154
MICHAEL H. BULKIN, age 59, Private Investor. In 1965, Mr.
MICHAEL H. BULKIN Bulkin joined McKinsey & Company, Inc. (international
management consulting firm). He became a principal in 1970
DIRECTOR SINCE 1998 and was elected a director in 1976. While serving with
McKinsey & Company, Mr. Bulkin held several leadership
positions including Managing Director of various offices,
Chairman of the Partner Evaluation and Compensation
Committee and member of the Shareholders Committee,
Executive Committee, Strategy Development Committee,
Professional Personnel Committee and Partner Election
Committee. Mr. Bulkin retired from McKinsey & Company in
1993. In 1994, Mr. Bulkin became a Director of Bunge
International Ltd. (diversified company with businesses in
grain trading, the food industry and textiles) and became an
advisor to Three Cities Research (private investment
company) where he serves as a Director of three portfolio
companies, including Pameco Holdings.
Common Shares owned 0 Nominee for term
expiring in 2001
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION
<C> <S>
WILLIAM J. SHARP, age 56, President Goodyear Global Support
WILLIAM J. SHARP [PHOTO] Operations (tire, engineered products and chemicals
manufacturer). Mr. Sharp began his career with Goodyear in
DIRECTOR SINCE 1998 1964. Following various assignments in the United States and
abroad, Mr. Sharp was named Director of European Tire
Production in 1984. He then was appointed Vice President of
Tire Manufacturing in 1987 and later Executive Vice
President of Product Supply in 1991. In 1992, he became
President and General Manager of Goodyear's European
Regional Operations.
Common Shares owned 425 Term expires 2001
</TABLE>
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
SANDRA HARDEN AUSTIN, age 50, President and Chief Executive
AUSTIN PHOTO Officer, Sedona Healthcare Group, Inc. Between 1981 and
1988, Ms. Austin was employed by the Huron Road Hospital in
DIRECTOR SINCE 1994 Cleveland, and during that time served as the Director of
Planning, Vice President and President. In 1988, she was
appointed Senior Vice President and General Manager of the
Medical/Surgical and Psychiatry Management Centers of
University Hospitals of Cleveland and served in that
capacity until 1990. Ms. Austin was named the Executive Vice
President and Chief Operating Officer of The University of
Chicago Hospitals in 1990 and served in that capacity until
1994, at which time she was appointed President of Caremark
Clinical Management Services, a division of Caremark, Inc.
Ms. Austin was named President of Caremark Physician
Services, a division of Caremark, Inc. which provides
physician practice management services, in 1995. Ms. Austin
left Caremark, Inc. in 1996. Ms. Austin also serves as a
director of National City Corporation and South Shore Bank
(bank holding companies) and Atria Communities, Inc.
(provider of assisted and independent living communities for
the elderly).
Common Shares owned 2,962(1) Term expires 1999
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
GLENN R. BROWN, age 67, Science Advisor to the Governor of
BROWN PHOTO the State of Ohio. Retired Senior Vice President and
Director Standard Oil Company (now BP America). Dr. Brown
DIRECTOR SINCE 1988 joined The Standard Oil Company (Ohio) in 1953 and, after
serving in various assignments, was elected a Senior Vice
President in 1979. He also served as a director of Standard
Oil from 1981 until his retirement in 1986. Following his
retirement from Standard Oil, Dr. Brown served at Case
Western Reserve University as Director of Strategic
Planning, Dean of the Colleges and from 1990-1993 as Vice
Provost for Corporate Research and Technology Transfer. He
is also a Director of Nordson Corporation (manufacturer of
industrial application equipment).
Common Shares owned 8,917(1) Term expires in 2000
WILLIAM E. BUTLER, age 66, Retired Chairman of the Board and
BUTLER PHOTO Chief Executive Officer, Eaton Corporation (engineered
products for automotive, industrial, commercial and military
DIRECTOR SINCE 1992 markets). Mr. Butler was employed by Eaton from 1957 through
1995, serving as President and Chief Executive Officer prior
to his election as Chairman in 1991. Mr. Butler is a
director of Applied Industrial Technologies, Inc.
(industrial products distributor), Pitney Bowes Inc.
(manufacturer of mailing, copying and facsimile systems),
Zurn Industries, Inc. (manufacturer of plumbing products and
systems), Goodyear Tire & Rubber Company (manufacturer of
tires and other products) and Borg-Warner Automotive
Corporation (power train automotive systems).
Common Shares owned 4,462 (1) Term expires in 2000
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
JOHN C. MORLEY, age 66, President of Evergreen Ventures,
MORLEY PHOTO Ltd. (private investment company). Retired Director,
President and Chief Executive Officer of Reliance Electric
DIRECTOR SINCE 1987 Company (manufacturer of industrial motors and controls,
mechanical power transmission products and specialty
telecommunication products and systems). Mr. Morley began
his career with Exxon Corporation in 1958 and served as
President of Exxon Chemical Company, USA and Senior Vice
President of Exxon USA before joining Reliance in 1980 as
President and Chief Executive Officer. In December, 1986,
Mr. Morley led an investor group in the leveraged
acquisition of Reliance Electric Company from Exxon. In
January of 1995, Rockwell International Corporation acquired
Reliance Electric Company. Mr. Morley serves as a Director
of AMP Incorporated (manufacturer of electrical and
electronic components), Lamson and Sessions, Inc.
(manufacturer and marketer of consumer and commercial
electrical and polymeric products) and as a Director and
non-executive Chairman of the Board of Cleveland-Cliffs,
Inc. (a full service iron-ore company).
Common Shares owned 9,937(1) Term expires in 2000
HECTOR R. ORTINO, age 55, President and Chief Operating
ORTINO PHOTO Officer of Ferro. He began his career as Treasurer of Ferro
Argentina in 1971 and subsequently became Financial Director
DIRECTOR SINCE 1993 in 1973. In 1976, Mr. Ortino was promoted to Managing
Director of Ferro Argentina. Mr. Ortino was named Managing
Director of Ferro Mexico in 1982. In 1983, he was appointed
Assistant to the Executive Vice President -- Finance and
relocated to Cleveland. He was named Vice
President -- Finance in 1984; was named Vice
President -- Finance and Chief Financial Officer in 1987;
was named Senior Vice President and Chief Financial Officer
in 1991; was named Executive Vice President and Chief
Financial -- Administrative Officer in 1993; and was named
President and Chief Operating Officer in 1996. Prior to
joining Ferro, Mr. Ortino served as Treasurer of Columbia
Broadcasting Systems, Argentina and Assistant to the
Treasurer of Pfizer, Inc., Argentina. Mr. Ortino is also a
director of Bunge International Ltd. (diversified company
with businesses in grain trading, the food industry and
textiles) and Parker Hannifin Corporation (producer of
motion and control components for industrial and aerospace
markets).
Common Shares owned 225,358(1) Term expires in 2000
ESOP Convertible Preferred Shares beneficially owned 3,149
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
DIRECTORS WHOSE TERMS
OF OFFICE WILL CONTINUE
AFTER THE MEETING
<C> <S>
REX A. SEBASTIAN, age 68, Private Investor. Mr. Sebastian
SEBASTIAN PHOTO began his career with Procter and Gamble. In 1955, he joined
Cummins Engine Company, Inc. where he held several positions
DIRECTOR SINCE 1986 including Vice-President -- International and Managing
Director of Cummins Engine Company, Ltd., in Scotland. In
1966, Mr. Sebastian joined Dresser Industries, Inc. (energy
and industrial-related products and services) as Vice
President -- International Operations and was named Vice
President -- Operations in 1971. In 1975, he was named
Senior Vice President -- Operations, a position he held
until his retirement in 1985. Mr. Sebastian is a member of
the Board of Directors of Hallwood Energy Corporation (oil
and gas exploration and production).
Common Shares owned 12,619(1) Term expires 1999
DENNIS W. SULLIVAN, age 59, Executive Vice President of
SULLIVAN PHOTO Parker-Hannifin Corporation (manufacturer of fluid power
products). Mr. Sullivan began his career with
DIRECTOR SINCE 1992 Parker-Hannifin Corporation in 1960 as a Sales Engineer, and
after serving in various assignments, was named Group Vice
President in 1972; President of the Fluid Connectors Group
in 1976; Corporate Vice President in 1978; President of the
Fluidpower Group in 1979; President of the Industrial Sector
in 1980; and he assumed his present position in 1981. Mr.
Sullivan is also a Director of Parker-Hannifin and KeyCorp
(bank holding company).
Common Shares owned 10,022(1) Term expires 1999
</TABLE>
- ---------------
(1) The shares reported as owned by Messrs. Bersticker and Ortino include shares
that they do not own of record but of which they are beneficial owners. An
individual is deemed to be the beneficial owner of shares as to which he
exercises or influences voting power or investment power. The number of
shares (included in those reported above) as to which Messrs. Bersticker and
Ortino are not owners of record but as to which they exercise or influence
voting control or investment decisions are as follows: Mr.
Bersticker -- 152,096 shares and Mr. Ortino -- 10,950 shares. The number of
shares reported above for Messrs. Bersticker and Ortino include 107,400 and
65,000 shares, respectively, issued to them under the Performance Share Plan
that are subject to risk of forfeiture based upon the terms of that plan.
The number of shares that may be acquired pursuant to exercisable stock
options as of May 1, 1998 are as follows: Mr. Bersticker -- 247,500 shares;
Mr. Ortino -- 121,125 shares; Ms. Austin -- 1,875 shares; Mr. Brown -- 2,812
shares; Mr. Butler -- 2,812 shares; Mr. Morley -- 2,812 shares; Mr.
Sebastian -- 2,812 shares; and Mr. Sullivan -- 2,812 shares (included in the
number of shares reported above).
6
<PAGE> 9
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
Information is set forth below regarding beneficial ownership of common
stock of the Company by (i) each person who is a director; (ii) each executive
officer named in the Summary Compensation Table on page 19; and (iii) all
directors and executive officers as a group. Except as otherwise noted, each
person has sole voting and investment power as to his or her shares. Information
is as of February 24, 1998.
<TABLE>
<CAPTION>
SHARES
SHARES OF UNDERLYING
COMMON STOCK OPTIONS ESOP
OWNED DIRECTLY EXERCISABLE TOTAL CONVERTIBLE
OR INDIRECTLY WITH 60 COMMON PREFERRED
Name (a)(b)(e) DAYS(c)(e) STOCK(e) Stock(e)
---- -------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
DIRECTORS
Sandra H. Austin............... 1,087 1,875 2,962
Albert C. Bersticker........... 347,912 247,500 595,412 3,154
Paul S. Brentlinger............ 12,496 2,812 15,308
Glenn R. Brown................. 6,105 2,812 8,917
Michael H. Bulkin.............. 0(d) 0 0
William E. Butler.............. 1,650 2,812 4,462
A. James Freeman............... 21,422 2,812 24,234
John C. Morley................. 7,125 2,812 9,937
Hector R. Ortino............... 104,233 121,125 225,358 3,149
Rex A. Sebastin................ 9,807 2,812 12,619
William J. Sharp............... 425(d) 0 425
Dennis W. Sullivan............. 7,210 2,812 10,022
FIVE OTHER OFFICERS NAMED IN SUMMARY COMPENSATION TABLE
R. Jay Finch................... 25,013 31,125 56,138 1,951
James F. Fisher................ 57,457 60,937 118,394 3,137
James B. Friederichsen......... 26,689 22,406 49,095 801
J. Larry Jameson............... 25,951 12,750 38,701 248
Gary H. Ritondaro.............. 46,952 45,599 92,551 2,557
Twenty-one Directors
and Executive Officers
as a Group................... 769,697 644,772 1,414,469 23,626
</TABLE>
- ---------------
(a) The beneficial ownership of Messrs. Bersticker and Ortino are set forth
below their biographies on pages 2 and 5 and further in a footnote on page 6
of this
7
<PAGE> 10
Proxy Statement. With respect to other officers names in the Summary
Compensation Table on page 19 of this Proxy Statement, the shares reported
for Messrs. Fisher, Finch, Friederichsen, Ritondaro and Jameson include
22,000, 21,450, 25,800, 30,600 and 21,450 shares issued under the
Performance Share Plan which are subject to risk of forfeiture based upon
terms of that plan.
(b) The shares reported for Brentlinger, Freeman and Fisher include 225, 3,000,
and 20,859 shares that they do not own of record but of which they are
beneficial owners.
(c) Exercisable stock options as of May 1, 1998.
(d) Elected a director in January 1998.
(e) The number of shares of Common Stock gives effect to the three-for-two split
of Ferro's Common Stock on November 14, 1997.
The percentage of outstanding common stock, including options exercisable
within 60 days of February 24, 1998, the record date, beneficially owned by all
directors and executive officers as a group is 3.7%. The percentage of such
shares beneficially owned by any director does not exceed 1%, except Mr.
Bersticker, who owns 1.6% of the outstanding Common Stock.
With regard to ESOP Convertible Preferred Stock, directors and executive
officers as a group own 1.9% of the outstanding shares of that series.
8
<PAGE> 11
The following table sets forth information about each person known by Ferro
to be the beneficial owner of more than 5% of its outstanding Common Stock or
stock convertible into Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT
NAME AND ADDRESS NATURE OF BENEFICIAL OF
OF BENEFICIAL OWNER OWNERSHIP(4) CLASS
------------------- -------------------- -------
<S> <C> <C>
FMR Corporation......................................... 4,901,547(1) 13.0%
82 Devonshire Road
Boston, Massachusetts 02109
Mario J. Gabelli and related entities................... 3,557,625(2) 9.4%
One Corporate Center
Rye, New York 10017
National City Bank, Trustee............................. 1,271,120(3) 100%
under the Ferro Corporation
Savings and Stock Ownership Plan
1900 East 9th Street
Cleveland, Ohio 44114
</TABLE>
- ---------------
(1) Information regarding share ownership was obtained from Schedule 13G filed
February 10, 1998, by FMR Corporation.
(2) Information regarding share ownership was obtained from Schedule 13D filed
March 5, 1996 by The Gabelli Group, Inc. Mario J. Gabelli is deemed to be
the beneficial owner of all entities jointly filing such Schedule 13D.
(3) The beneficial owners of the Savings and Stock Ownership Plan are
participating employees of the Company. The 1,271,120 shares of Convertible
Preferred Stock are convertible into 3,303,387 shares of Common Stock,
representing approximately 9% of the outstanding Common Stock. The Preferred
Stock is nontransferable and, upon distribution of an account balance to a
plan participant, such participant receives Common Stock issuable upon
conversion of the Preferred Stock or cash payable upon redemption of the
Preferred Stock. Each share of Preferred Stock carries one vote, voting
together with the Common Stock on most matters. The Trustee votes in
accordance with the instructions of plan participants.
(4) The number of shares of Ferro Common stock gives effect to the three-for-two
split of Ferro's Common Stock on November 14, 1997.
Section 16(a) of the Securities Exchange Act of 1934 requires Ferro's
officers and directors, and persons who own more than ten percent of a
registered class of Ferro's
9
<PAGE> 12
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Officers, directors and greater than
ten-percent shareholders are required by SEC regulation to furnish Ferro with
copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to Ferro during 1997 and Forms 5 and amendments thereto furnished to
Ferro with respect to 1997, no director, officer, beneficial owner of more than
10% of its outstanding Common Stock or stock convertible into Common Stock or
any other person subject to Section 16 of the Exchange Act, failed to file on a
timely basis during 1997 or prior fiscal years any reports required by Section
16(a) of the Exchange Act.
CERTAIN MATTERS PERTAINING TO THE BOARD OF DIRECTORS
During 1997, the Board held seven regularly scheduled monthly meetings and
committees of the Board met from time to time upon call of the Chairman (or in
the case of the Audit Committee, upon call of its Chairman). During 1997, each
director attended at least 75% of the aggregate of the total number of meetings
of the Board and the committees on which he or she served.
Each director who is not an employee of Ferro is paid an annual retainer
fee of $23,000. In addition, directors (other than employee directors) are paid
an attendance fee of $1,500 for meetings of the Board and $1,000 for meetings of
its committees. The Chairs of the Audit Committee, the Finance Committee and the
Compensation and Organization Committee are each paid an additional annual
retainer of $4,000. The directors have the right to defer their fees into a
Ferro Common Stock account. Amounts so deferred will be invested in Ferro Common
Stock, together with dividends thereon which will be reinvested in Ferro Common
Stock. The deferred account will be distributed after the retirement of the
director.
Pursuant to the Employee Stock Option Plan, on the date of each annual
shareholders' meeting, each non-employee Director who continues as a Director
after that annual meeting is automatically granted an option to purchase 2,500
shares of Common Stock.
The Audit Committee of the Board of Directors engages in the functions
usual to an audit committee of a publicly held corporation, including
recommendations as to the engagement of independent accountants; review with the
independent accountants of the proposed scope of and plans for annual audits and
review of audit results; review of the adequacy of internal financial controls
and internal audit functions; and
10
<PAGE> 13
review of any problems identified by either the internal or external audit
functions. During 1997, the Audit Committee met twice. Messrs. Brown and Morley
are the current members of the Audit Committee, with Mr. Morley serving as
Chairman. Mr. Brentlinger and Mr. Freeman were members of the Audit Committee
during 1997 and are continuing until their retirement in 1998.
The Compensation and Organization Committee considers and formulates
recommendations with respect to the compensation of Ferro's officers and
performs functions delegated by the Board with respect to the Stock Option Plan,
the Performance Share Plan and the Incentive Compensation Plan. Included among
its functions is the review of recommendations (including written
recommendations made by any shareholder) as to new members of the Board of
Directors. Shareholder recommendations for members of the Board of Directors
should be submitted in writing to the Secretary of Ferro. During 1997, the
Committee met five times. A report of the Compensation and Organization
Committee is set forth on pages 14 through 17 of this Proxy Statement. Ms.
Austin and Messrs. Brown and Butler are the current members of the Compensation
and Organization Committee with Mr. Butler serving as Chairman. Mr. Freeman was
a member of the Compensation and Organization Committee during 1997 and is
continuing until his retirement in 1998.
The Finance Committee reviews the Company's financial plans and recommends
actions to management and/or the Board of Directors as the Committee deems
appropriate. The Finance Committee reviews the Company's identified world-wide
financing requirements and its plans to meet such requirements. Included among
its responsibilities is the review of projected world-wide cash flow, the
Company's financial objectives and strategies, major acquisitions, and
investment performance of the Company's pension plans. In addition, the
Committee must review and approve the annual capital appropriation budget.
During 1997, the Committee met twice. Ms. Austin and Messrs. Sebastian and
Sullivan are the current members of the Finance Committee, with Ms. Austin
serving as Chairperson. Mr. Brentlinger was a member of the Finance Committee
during 1997 and is continuing until his retirement in 1998.
11
<PAGE> 14
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES
The Company's Articles of Incorporation presently authorize the issuance of
150,000,000 shares of Common Stock and 2,000,000 shares of Serial Preferred
Stock. The Board recommends an increase in the number of authorized shares of
Common Stock from the 150,000,000 currently authorized to 300,000,000. As of
December 31, 1997, there were issued and outstanding 37,323,209 shares of the
Company's Common Stock. Also, as of that date 1,996,535 shares of Common Stock
were reserved for issuance under the Company's Stock Option Plan, 2,770,108
shares were reserved for issuance under the Company's Performance Share Plan,
and 42,089,852 shares were reserved for issuance upon the exercise of the rights
pursuant to the Shareholder Rights Plan. Each of the foregoing Plans contains
antidilution provisions to the effect that the number of shares reserved under
the Plans will be increased to reflect the effect of stock splits and the like.
The balance of Common Stock available for issuance on that date was 65,820,296
shares.
On October 24, 1997, the Board of Directors approved the Company's most
recent three-for-two split of its Common Stock for shareholders of record on
November 14, 1997. The Board of Directors is of the opinion that the present
balance of Common Stock available for issuance may be insufficient to enable the
Company to take advantage of business opportunities that may arise or for other
corporate purposes such as future stock dividends or stock splits. The Board of
Directors has no present plans, arrangements, commitments or undertakings for
the issuance of additional shares. Authorized but unissued shares may be issued
at some later date on authorization by the Board of Directors without further
action of shareholders except as may be required by applicable law or regulation
or by the rules of the New York Stock Exchange.
The authorization of the additional shares would not, by itself, have any
effect on the rights of the Company's shareholders. The issuance of the
additional shares for corporate purposes other than a stock split could have,
among other things, a dilutive effect on earnings per share and on the equity
and voting power of shareholders at the time of the issuance. In addition, the
increase in authorized shares could render more difficult under certain
circumstances or discourage an attempt to obtain control of the Company, whether
through tender offer or otherwise, by, for example, allowing the issuance of
shares that would dilute the share ownership of a person attempting to obtain
control. This proposal is not, however, being made in response to any effort of
which the Company is aware to accumulate shares or obtain control of the
Company.
12
<PAGE> 15
The following table sets forth information relating to the number of shares
of Common Stock currently authorized and available for issuance and the number
of shares of Common Stock to be available upon approval of the proposed
amendment.
<TABLE>
<CAPTION>
BEFORE AFTER
PROPOSED PROPOSED
INCREASE INCREASE
----------- -----------
<S> <C> <C>
Total Number of Shares of Common Stock
Authorized......................................... 150,000,000 300,000,000
Shares Outstanding................................... [37,323,209] [37,323,209]
Shares Reserved for Stock Option Plans............... [1,996,535] [1,996,535]
Shares Reserved for Performance Share Plan........... [2,770,108] [2,770,108]
Shares Reserved for Shareholder Rights Plan.......... [42,089,852] [42,089,852]
Shares Available for Issuance for Other
Corporate Purposes................................. 65,820,296 215,820,296
</TABLE>
RECOMMENDATION AND VOTE
The affirmative vote of two-thirds of the outstanding shares of the
Company's Common Stock and Series A ESOP Convertible Preferred Stock, voting as
a single class, entitled to vote at the meeting is required to adopt the
proposed amendment to the Articles of Incorporation.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR AMENDMENT OF THE ARTICLES OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM
150,000,000 TO 300,000,000.
DESIGNATION OF AUDITORS
Unless otherwise indicated, the accompanying proxy will be voted in favor
of ratifying the selection of KPMG Peat Marwick LLP to audit the books and
accounts of Ferro for the current year ending December 31, 1998. KPMG Peat
Marwick LLP have been acting as the auditors of Ferro for many years. On
recommendation of the Audit Committee, the Board of Directors has appointed such
firm to continue as Ferro's auditors for the current year, subject to the
approval thereof by the shareholders.
Representatives of KPMG Peat Marwick LLP will be at the annual meeting of
shareholders, will have an opportunity to make a statement if they desire to do
so and will be available to respond to appropriate questions.
13
<PAGE> 16
INFORMATION CONCERNING EXECUTIVE OFFICERS
REPORT OF THE COMPENSATION AND ORGANIZATION COMMITTEE
The principal components of senior executive officer compensation at Ferro,
and the role of the Compensation and Organization Committee of the Board of
Directors as to each component in 1997, were as follows:
1. Annual salary level for Messrs. Bersticker and Ortino recommended
by the Committee and approved by the Board, and annual salary level for
other executive officers approved by the Committee.
2. Annual Incentive Compensation Plan (a cash bonus plan) under which
achievement is measured primarily by attainment of mathematical targets
and, to a lesser extent, by non-mathematical determinations. The Committee
adopts such a plan each year, including the placement of senior executives
in the plan, determination of the applicable percentage of salary to be
used for bonus measurement, and determination of the mathematical targets
by which the level of bonus achievement will be measured. With respect to
non-mathematical bonus matters, the Committee recommends, and the Board
approves, the Chief Executive Officer's actual achievement of goals and
bonus award for the completed year and the Committee approves the actual
non-mathematical bonus awards to senior executive officers other than the
Chief Executive Officer.
3. Performance Share Plan (a long term incentive plan) under which
annual performance share grants may be converted into shares of Common
Stock based upon the degree of achievement of Performance Targets during
the Performance Period. The Committee determines the award of performance
shares and establishes the Performance Targets which will be applicable to
determine the degree of conversion of performance share grants into Common
Stock under the Performance Share Plan.
4. Stock Options under the Stock Option Plan. The Committee determines
the award of Stock Options under the Stock Option Plan.
Ferro retains and relies upon the advice of independent executive
compensation consultants. Currently, Ferro's executive compensation consultant
is Buck Consultants. In 1997, however, Ferro relied upon the services and advice
of its former executive compensation consultant, TPF&C, a Towers Perrin Company.
TPF&C's advice is based on a variety of competitive data maintained by, or
available to, TPF&C. From these data banks, TPF&C derived recommended standards
14
<PAGE> 17
for compensation levels at Ferro based upon competitive levels at peer group
companies.
Applying this data to Ferro, and to Mr. Bersticker, Ferro's Chief Executive
Officer, the Committee recommended (and the Board approved), for 1997:
1. A salary level of $605,000, which is at the median of competitive
market salary data as reported by TPF&C.
2. An annual incentive plan cash bonus target amount equal to 75% of
salary (65% based on the mathematical application of performance factors
and 10% based on non-mathematical factors). The mathematical portion of the
bonus is based on the degree of achievement of a matrix of mathematical
targets combining return on equity and net income growth. The threshold,
target and maximum bonus achievement levels for return on equity were
14.5%, 16% and 17%, respectively, while the threshold, target and maximum
bonus achievement levels for net income growth were 10%, 15% and 18%,
respectively. The target bonus amount is payable upon achievement at the
"target" level on the matrix, while the maximum bonus amount payable upon
"maximum" achievement is 200% of the target bonus. The non-mathematical
portion of the bonus is based upon an evaluation of performance against
specified annual objectives. Such aggregate annual incentive target amounts
reflected the median of other companies in the market place for 1997 as
reported by TPF&C.
3. An award of stock options for 90,000 shares (after the
three-for-two stock split) under the Ferro Stock Option Plan. The original
pre-split award of stock options was for 60,000 shares.
4. A Performance Share award of 49,500 shares (after the three-for-two
stock split). The original pre-split award of Performance Shares was 33,000
shares.
The stock option award level and the performance share award level are in
the third quartile of long term incentive programs of comparable companies in
the market place as reported by TPF&C.
The future value of stock option awards will, of course, be a function of
the market value for Ferro stock in the future. The future value of performance
share grants will be a function both of the future market value of Ferro stock
and of the degree of achievement of the performance targets by which the
conversion of such performance share grants is determined.
15
<PAGE> 18
In recommending Mr. Bersticker's non-mathematical (personal performance)
level of bonus achievement, the Committee considered the degree of achievement
of specific objectives that had been agreed upon with the Board for Mr.
Bersticker at the beginning of 1997. The determination of the actual award was
made in January, 1998. The award was fixed at 150% of target, or $90,750.
The recommendations of the Committee represented satisfaction with the
manner in which Mr. Bersticker has performed his responsibilities as Chief
Executive Officer and his maturity, leadership, judgment and experience in the
business of Ferro. The recommendations and actions of the Committee included
consideration of TPF&C's data as to competitive standards of compensation in the
market place. TPF&C advised the Company as to competitive levels of salary
(fixed annual compensation), short term incentive compensation (Ferro's annual
cash bonus plan) and long term incentive compensation (Ferro's Stock Option and
Performance Share Plans). The Committee's policy is to attain competitive levels
of executive compensation in each of these areas (salary, short term incentive
and long term incentive).
Mr. Bersticker strongly advocates, and the Committee concurs, that a
substantial portion of executive compensation should be variable, based upon
performance of the Company and results achieved by each member of management.
Application of this principle resulted in 1997 long term incentive compensation
levels for senior executive officers in the third quartile of competitive market
data as reported by TPF&C.
In 1997, Ferro's attainment of profitability performance standards improved
over 1996 resulting in higher levels of executive bonuses, reflecting attainment
of 149% of the target bonus levels. Unless target levels of profitability
performance are achieved, realization of values by the senior executives under
the Performance Share Plan will be significantly below values reflected at the
time of awards, because non-achievement of Performance Targets will result in
significant forfeiture of Performance Shares previously awarded.
In making its determinations and recommendations with respect to Messrs.
Ortino, Fisher, Finch, Friederichsen, Ritondaro, and Jameson the Committee
considered and discussed those same materials and information that were
considered with respect to Mr. Bersticker, as well as the advice and
recommendations of Mr. Bersticker as to such individuals. The Committee also
considered its evaluation of the individual performance of those individuals. In
the case of Messrs. Fisher, Finch, Friederichsen, and Jameson who have direct
responsibilities with respect to Company operations, their levels of achievement
under the Annual Incentive Compensation
16
<PAGE> 19
Plan and Performance Share Plan are materially impacted by the performance of
those specific operations which are in their respective areas of responsibility.
In 1993, the Internal Revenue Code was amended to add Section 162(m), which
generally provides that certain compensation in excess of $1 million per year
paid to a company's chief executive officer and any of its four highest paid
executive officers is no longer deductible to the Company unless the
compensation qualifies for an exception. Section 162(m) provides an exception
for performance based compensation if certain procedural requirements, including
shareholder approval of the material terms of the performance goals, are
satisfied. In 1994 and 1997, the Committee recommended, and the shareholders
approved, certain changes to the Company's Performance Share Plan and Employee
Stock Option Plan which would qualify such plans under the Section 162(m)
exception and preserve the tax deductibility to the Company of compensation paid
to executives under these plans in the future. Only Mr. Bersticker received
compensation in excess of $1 million in 1997.
S. H. Austin, G. R. Brown, W. E. Butler, A. J. Freeman
17
<PAGE> 20
PERFORMANCE COMPARED TO CERTAIN STANDARDS
The chart set forth below compares Ferro's cumulative total shareholder
return for the five years ended December 31, 1997 to (a) that of the Standard &
Poor's 500 Index and (b) that of a designated group of companies deemed to have
a peer group relationship to Ferro. In all cases, the information is presented
on a dividend reinvested basis.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
FERRO CORPORATION, S&P 500 INDEX AND
S&P SPECIALTY CHEMICALS INDEX(1)
<TABLE>
<CAPTION>
S&P SPECIALTY
MEASUREMENT PERIOD FERRO S&P 500 CHEMICALS
(FISCAL YEAR COVERED) CORPORATION INDEX INDEX
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 119.89 110.01 113.83
1994 91.26 111.51 99.44
1995 91.24 163.28 130.64
1996 113.14 186.34 141.47
1997 148.08 251.09 174.22
</TABLE>
NOTE: (1) Assumes $100 invested on December 31, 1992 in Ferro Common Stock, S&P
500 Index and S&P Specialty Chemicals Index.
18
<PAGE> 21
SUMMARY COMPENSATION TABLE
The following table shows on an accrual basis the elements of compensation
paid or awarded during each of the three years ended December 31, 1997 to the
Chief Executive Officer and each of the other six highest paid executive
officers of Ferro.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS(4)
--------------------------
ANNUAL COMPENSATION PERFORMANCE ALL OTHER
- ---------------------------------------------------- SHARE PLAN OPTIONS COMPEN-
NAME AND SALARY BONUS AWARD(1) (NO. OF SATION
PRINCIPAL POSITION YEAR ($) ($) ($) SHARES)(2) ($)(3)
- ---------------------------- ---- ------- ------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
A.C. Bersticker............. 1997 605,000 677,020 965,250 90,000 60,996
Chairman and Chief 1996 580,000 312,910 392,175 72,000 39,913
Executive Officer 1995 549,000 169,531 153,600 45,000 26,025
H.R. Ortino................. 1997 405,000 340,538 585,000 57,000 58,971
President and Chief 1996 388,000 167,044 236,250 45,000 30,242
Operating Officer 1995 311,000 86,306 69,600 22,500 23,714
J.F. Fisher................. 1997 250,000 142,029 257,400 18,000 14,975
Senior Vice President 1996 319,200 0 0 0 19,128
Ceramics and Colorants 1995 250,800 39,987 36,000 9,000 21,292
R.J. Finch.................. 1997 221,000 161,050 193,050 15,000 17,445
Vice President 1996 210,900 92,786 77,963 14,250 13,024
Specialty Plastics 1995 191,700 38,416 33,600 6,000 10,322
J.B. Friederichsen.......... 1997 238,000 137,054 257,400 16,125 21,177
Vice President 1996 227,500 74,961 103,950 18,750 14,692
Specialty Chemicals 1995 182,000 67,042 33,600 6,000 18,069
G.H. Ritondaro.............. 1997 225,000 147,184 280,800 24,150 26,371
Vice President and Chief 1996 200,000 64,400 103,950 18,750 18,730
Financial Officer 1995 155,300 32,735 26,400 3,750 14,664
J. L. Jameson............... 1997 202,000 125,399 193,050 22,500 23,923
Vice President 1996 168,446 71,372 77,963 14,250 31,986
Powder Coatings 1995 -- -- -- -- --
</TABLE>
- ---------------
Notes:
(1) The values reported are based upon the number of Performance Shares awarded,
valued at the market price of the Common Stock on the date of the award.
Such reported values are based upon achievement of target levels of
performance by Ferro during the performance period. Realization of such
values will be a function of Ferro's performance during the performance
periods. The performance period is three years. Performance is measured in
relation to standards tied to return on average common equity, net income
growth, return on average net assets employed and operating income growth.
If Ferro's performance exceeds target levels, the number of shares can
increase by up to 25% for shares awarded in 1995 and 1996 and up to 100% for
shares awarded in 1997. At December 31, 1997, the persons listed above hold
the following number of Performance Shares, valued at the value of the
underlying shares at December 31, 1997, applicable to performance periods
not yet completed: Mr. Bersticker, 74,400 shares, valued at $1,808,850; Mr.
Ortino, 45,000 shares, valued at $1,094,063; Mr. Fisher, 13,200 shares
valued at $320,925; Mr. Finch, 14,850 shares, valued at $361,041; Mr.
Friederichsen, 19,800 shares, valued at $481,388; Mr. Ritondaro, 21,000
shares, valued at $510,563 and Mr. Jameson, 14,850 shares, valued at
$361,041. Such values are also based upon achievement of target levels of
performance by Ferro during the performance period and realization of values
will be a function of Ferro's performance during the performance period.
19
<PAGE> 22
(2) Stock Option grants were awarded on the following dates: January 18, 1995,
January 17, 1996 and January 17, 1997.
(3) In the year ended December 31, 1997, All Other Compensation includes company
matching payments under the Ferro ESOP, as follows: Mr. Bersticker, $6,107,
Mr. Ortino, $6,107, Mr. Fisher, $5,937, Mr. Finch, $6,107, Mr.
Friederichsen, $5,937, Mr. Ritondaro, $5,937 and Mr. Jameson, $5,937;
personal use of leased automobiles, as follows: Mr. Bersticker, $4,918, Mr.
Ortino, $5,127, Mr. Fisher, $239, Mr. Finch, $4,049, Mr. Friederichsen, $0,
Mr. Ritondaro, $6,950 and Mr. Jameson, $6,244; taxable portion of benefits
under health, hospitalization, and life insurance programs, as follows: Mr.
Bersticker, $9,126, Mr. Ortino, $5,850, Mr. Fisher, $780, Mr. Finch, $0, Mr.
Friederichsen, $5,823, Mr. Ritondaro, $3,744 and Mr. Jameson, $2,106;
individual tax services, as follows: Mr. Bersticker, $4,725, Mr. Ortino,
$1,800, Mr. Fisher, $1,375 and Mr. Jameson, $3,250; and in the case of Mr.
Ortino, home leave benefits of $18,867. In addition, dividends received from
restricted stock granted under Performance Share Plans were as follows: Mr.
Bersticker, $36,120, Mr. Ortino, $21,220, Mr. Fisher, $6,644, Mr. Finch,
$7,289, Mr. Friederichsen, $9,417, Mr. Ritondaro, $9,740 and Mr. Jameson,
$6,386.
(4) The number of shares of Common Stock gives effect to the three-for-two split
of Ferro's Common Stock on November 14, 1997.
STOCK OPTION GRANTS, EXERCISES AND YEAR END VALUES
The following table sets forth information regarding grants of stock
options to each of the seven highest paid executive officers of Ferro under
Ferro's stock option plan during the fiscal year ended December 31, 1997. The
exercisability of the stock options vests at the rate of 25% per year. In the
case of death, retirement, disability or change of control, the options become
100% exercisable.
20
<PAGE> 23
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
% OF TOTAL
OPTIONS GRANT DATE
GRANTED TO PRESENT
OPTIONS EMPLOYEES EXERCISE EXPIRATION VALUE (2)
NAME GRANTED(1) IN 1997 PRICE DATE $
---- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
A.C. Bersticker
Chairman and
Chief Executive Officer......... 90,000 13.2% $19.50 1/17/2007 $627,000
H.R. Ortino
President and Chief
Operating Officer............... 57,000 8.3% $19.50 1/17/2007 $397,100
J.F. Fisher
Senior Vice President
Ceramics and Colorants.......... 18,000 2.6% $19.50 1/17/2007 $125,400
R.J. Finch
Vice President
Specialty Plastics.............. 15,000 2.2% $19.50 1/17/2007 $104,500
J.B. Friederichsen
Vice President
Specialty Chemicals............. 16,125 2.4% $19.50 1/17/2007 $112,400
G.H. Ritondaro
Vice President
and Chief Financial Officer..... 24,150 3.5% $19.50 1/17/2007 $168,300
J. L. Jameson
Vice President
Powder Coatings................. 22,500 3.3% $19.50 1/17/2007 $156,800
</TABLE>
- ---------------
Note:
(1) The number of options granted gives effect to the three-for-two split of
Ferro's Common Stock on November 14, 1997.
(2) The grant date present value has been calculated using the Black-Scholes
method of option valuation. The model assumes the following: (a) an option
term of ten years; (b) an interest rate that represents the interest rate on
a U.S. Treasury bond with a maturity date corresponding to the ten year
option term; (c) volatility calculated using month-end stock prices for the
past three years prior to grant date; and (d) the stock's annualized
dividend yield also over the past three years.
21
<PAGE> 24
The following table shows information regarding stock option exercises
during 1997 and information regarding options held at year end.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, DECEMBER 31,
SHARES 1997(1) 1997(2)
ACQUIRED ------------- -------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(1) REALIZED UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
A.C. Bersticker
Chairman and Chief Executive
Officer 47,250 $632,281 228,375/ $1,841,958/
177,750 $1,101,047
H.R. Ortino
President and Chief Operating
Officer 25,312 $422,919 84,375/ $ 628,841/
107,625 $ 666,070
J.F. Fisher
Senior Vice President
Ceramics and Colorants 11,812 $216,385 51,187/ $ 439,423/
25,500 $ 128,969
R.J. Finch
Vice President
Specialty Plastics N/A N/A 21,187/ $ 149,257/
29,813 $ 190,493
J.B. Friederichsen
Vice President
Specialty Chemicals N/A N/A 11,062/ $ 70,625/
34,313 $ 224,805
G.H. Ritondaro
Vice President and Chief
Financial Officer 5,062 $ 90,277 32,999/ $ 335,554/
41,026 $ 253,766
J. L. Jameson
Vice President
Powder Coatings N/A N/A 3,562/ $ 30,500/
33,188 $ 199,797
</TABLE>
- ---------------
Note:
(1) The number of shares and options gives effect to the three-for-two split of
Ferro's Common Stock on November 14, 1997.
(2) Value of unexercised in-the-money options is based on Ferro's NYSE closing
Common Stock price on December 31, 1997, of $24.3125.
22
<PAGE> 25
PERFORMANCE SHARE PLAN AWARDS
The following table sets forth information relating to Performance Share
Plan ("Plan") awards to each of the seven highest paid executive officers of
Ferro. Each such award under the Plan has a three year performance cycle ending
on December 31, 1999. A condition to vesting includes the continued employment
of the Plan participant to the end of the Performance Period. However, in the
case of death, disability or retirement, there is a pro rata payment at the end
of the Performance Period based upon the portion of the Performance Period
during which employment continued. Also, in the case of a change of control, a
cash payment equal to (1) the aggregate value of Performance Share awards based
on the remaining term in the executive's employment agreement and the portion of
the Performance Period that expired prior to the change in control, minus (2)
the value of payments made under the Plan, is paid at the time of the change of
control.
PERFORMANCE SHARE PLAN AWARDS IN 1997
<TABLE>
<CAPTION>
ESTIMATED FUTURE SHARE PAYOUTS(e)
NUMBER OF ---------------------------------------
NAME SHARES(e) THRESHOLD(b) TARGET(c) MAXIMUM(d)
---- --------- ------------ ----------- ----------
(IN SHARES)
<S> <C> <C> <C> <C>
A.C. Bersticker 49,500 24,750 49,500 99,000
Chairman and Chief Executive
Officer
H.R. Ortino 30,000 15,000 30,000 60,000
President and Chief Operating
Officer
J.F. Fisher 13,200 6,600 13,200 26,400
Senior Vice President
Ceramics and Colorants
R.J. Finch 9,900 4,950 9,900 19,800
Vice President
Specialty Plastics
J.B. Friederichsen 13,200 6,600 13,200 26,400
Vice President
Specialty Chemicals
G.H. Ritondaro 14,400 7,200 14,400 28,800
Vice President and Chief
Financial Officer
J. L. Jameson 9,900 4,950 9,900 19,800
Vice President
Powder Coatings
</TABLE>
- ---------------
Notes:
(a) Performance measurements are based on return on average common equity and
net income growth. Mr. Ortino and Mr. Ritondaro have additional measurements
based on return on net assets and growth in operating income. Mr. Fisher,
Mr. Finch, Mr. Friederichsen and Mr. Jameson have additional
23
<PAGE> 26
measurements based on their respective operating group return on net assets
and growth in operating income.
(b) Threshold is 50% of Award.
(c) Target is 100% of Award.
(d) Maximum is 200% of Award.
(e) The number of shares of Common Stock gives effect to the three-for-two stock
split of Ferro's Common Stock on November 14, 1997.
RETIREMENT PLAN
Ferro maintains a non-contributory defined benefit retirement program for
eligible salaried employees, including officers. In general, as applied to the
senior officer group of Ferro the retirement program provides a monthly pension
at age 60 payable for life with a guarantee of 120 monthly payments. The monthly
retirement benefit payable to a participating officer who retires on or after
age 60 with 30 or more years of service is 50% of the monthly average of the
participant's covered compensation during the five consecutive calendar years in
which his covered compensation was the highest, reduced by 50% of his primary
Social Security benefit. If the participating employee has less than 30 years of
service, the monthly pension net benefit is reduced proportionately. Generally,
for purposes of the retirement program, covered compensation means basic salary
plus bonus plus values earned under the Performance Share Plan. Section 415 of
the Internal Revenue Code limits the annual benefits payable from the Ferro
Qualified Retirement Plan (to $125,000 per year for 1997). In addition, the
amount of covered compensation used to compute the Ferro Qualified Retirement
Plan benefit is limited by the Internal Revenue Code. In response to such
limitations and for certain other purposes, Ferro has adopted an Excess Benefits
Plan. The Excess Benefits Plan will pay retirement program benefits to
participants in the Ferro Qualified Retirement Plan in excess of those payable
from the Ferro Qualified Retirement Plan. Ferro's established normal retirement
age is 65, but in the case of officers, retirement benefits are not subject to
reduction if the officer retires after attainment of age 60 with 30 years of
service and if the officer signs a non-competition agreement. The following
table shows estimated annual benefits payable upon retirement under both the
Ferro Qualified Retirement Plan and the Excess Benefits Plan to officers with
the specified years of service and whose average annual covered compensation
during the five consecutive calendar years in which their covered compensation
was the highest would be as indicated. As of December 31, 1997, Messrs.
Bersticker, Ortino,
24
<PAGE> 27
Fisher, Finch, Friederichsen, Ritondaro and Jameson had 39, 26, 38, 6, 3, 11 and
2 years of service, respectively.
<TABLE>
<CAPTION>
YEARS OF SERVICE AT AGE 65
ASSUMED RETIREMENT IN 1997
REGULAR ---------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$ 200,000 $ 46,022 $ 61,363 $ 76,703 $ 92,044 $ 92,044
300,000 71,022 94,696 118,370 142,044 142,044
400,000 96,022 128,029 160,037 192,044 192,044
500,000 121,022 161,363 201,703 242,044 242,044
600,000 146,022 194,696 243,370 292,044 292,044
700,000 171,022 228,029 285,037 342,044 342,044
800,000 196,022 261,363 326,703 392,044 392,044
900,000 221,022 294,696 368,370 442,044 442,044
1,000,000 246,022 328,029 410,037 492,044 492,044
1,100,000 271,022 361,363 451,703 542,044 542,044
1,200,000 296,022 394,696 493,370 592,044 592,044
</TABLE>
- ---------------
The five year average covered compensation for the individuals listed in
the Summary Compensation Table was: Mr. Bersticker, $1,051,198; Mr. Ortino,
$586,099; Mr. Fisher, $375,192; Mr. Finch, $281,277; Mr. Friederichsen,
$265,693, Mr. Ritondaro, $284,132 and Mr. Jameson, $231,754.
EXECUTIVE EMPLOYMENT AGREEMENTS
Ferro is a party to executive employment agreements (the "Executive
Employment Agreements") with 12 of its officers, including each of the
individuals named in the summary compensation table on page 19 of this Proxy
Statement. The purpose of the Executive Employment Agreements is to reinforce
and encourage the continued attention and dedication of these officers to their
assigned duties without distraction in the face of (i) solicitations by other
employers and (ii) the potentially disturbing circumstances arising from the
possibility of a change in control of Ferro. To that end, the Executive
Employment Agreements obligate Ferro to provide certain severance benefits,
described below, to any of these officers whose employment is terminated under
certain circumstances.
Benefits are payable under the Executive Employment Agreements if the
officer's employment is terminated for reasons other than for cause, disability,
death or normal retirement or if the officer terminates his employment for "Good
Reason."
25
<PAGE> 28
Good Reason will exist if (1) Ferro fails to honor any of its obligations or
responsibilities under certain designated sections of the Executive Employment
Agreement or (2) if, following a change in control, the officer receives a
notice of termination from the Company for the purposes of preventing extension
of the term of the officer's employment agreement or (3) if the officer
voluntarily resigned at any time during the three month period following the
first anniversary of a change in control. Benefits are also payable if a
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of Ferro
fails to expressly assume the Executive Employment Agreements. The principal
benefits to be provided to the officers under the Executive Employment
Agreements are (i) a lump sum severance payment equal to a full year's
compensation (base salary and incentive compensation) multiplied by three in the
cases of Messrs. Bersticker and Ortino, and multiplied by two in the case of the
other officers with whom Executive Employment Agreements were made, (ii) a lump
sum calculated to approximate the present value of the additional retirement
benefits to which the officer would have become entitled had he remained in the
employment of Ferro for the same number of years used in computing the lump sum
severance payment, (iii) continued participation in Ferro's employee benefit
programs such as group life, health and medical insurance coverage for the same
number of years used in computing the lump sum severance payment, and (iv) a
cash payment in an amount to reimburse on an after tax basis that portion of any
excise tax attributable to payments or benefits required to be made to the
executive.
As security for its payment of the benefits provided for in the Executive
Employment Agreements, Ferro has established, in accordance with its obligation
under the Executive Employment Agreements, an escrow account at National City
Bank and deposited into that escrow account a percentage of the amount which
would be payable to each of the officers under the Executive Employment
Agreements. No officer has a right to receive any amount in the escrow account
until Ferro has defaulted in its obligations to that officer under the Executive
Employment Agreement to which he is a party. Interest earned on the escrow
account is paid to the Company.
26
<PAGE> 29
FORM 10-K ANNUAL REPORT
A COPY OF FERRO'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997, WILL BE
FURNISHED WITHOUT CHARGE TO SHAREHOLDERS UPON WRITTEN REQUEST TO PATRICK H.
CAVANAGH, DIRECTOR OF CORPORATE COMMUNICATIONS, FERRO CORPORATION, 1000 LAKESIDE
AVENUE, CLEVELAND, OHIO 44114.
SHAREHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 1999 annual
meeting and who wishes to have the proposal included in Ferro's proxy statement
and form of proxy for that meeting must deliver the proposal to Ferro at its
executive offices, 1000 Lakeside Avenue, Cleveland, Ohio 44114, not later than
November 19, 1998.
MISCELLANEOUS
The accompanying proxy is solicited by the Board of Directors of Ferro and
will be voted in accordance with the instructions thereon if it is returned duly
executed and is not revoked. A shareholder may revoke his proxy without
affecting any vote previously taken, by giving notice to the Company in writing
or in open meeting.
Ferro will bear the cost of preparing and mailing this statement, with the
accompanying proxy and other instruments. Ferro will also pay the standard
charges and expenses of brokerage houses, or other nominees or fiduciaries, for
forwarding such instruments to and obtaining proxies from securities holders and
beneficiaries for whose account they hold registered title to shares of the
Company. In addition to using the mails, directors, officers and other employees
of Ferro, acting on its behalf, may also solicit proxies, and Georgeson & Co.,
New York, New York, has been retained, at an estimated cost of $10,000 plus
expenses, to aid in the solicitation of proxies from brokers, institutional
holders and individuals who own a large number of shares. Proxies may be
solicited personally, by telephone, or by telegram. This proxy statement and the
accompanying proxy will be sent to shareholders by mail on or about March 19,
1998.
The record date for determination of shareholders entitled to vote at the
1998 annual meeting is February 24, 1998. On that date the outstanding voting
securities of Ferro were 37,475,852 shares of Common Stock, having a par value
of $1 each and 1,271,120 shares of Series A ESOP Convertible Preferred Stock.
Each share has one
27
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vote and the Common Stock and the Series A ESOP Convertible Preferred Stock vote
together as a single class.
Under the General Corporation Law of Ohio, if notice in writing is given by
any shareholder to the President or any Vice President or the Secretary of
Ferro, not less than forty-eight hours before the time fixed for holding the
meeting, that the shareholder desires that the voting for election of directors
shall be cumulative, and if an announcement of the giving of such notice is made
upon the convening of the meeting, each shareholder will have cumulative voting
rights. Cumulative voting means that each shareholder is entitled to that number
of votes equal to the number of shares that he owns multiplied by the number of
directors to be elected. Each shareholder may cast all of his votes for a single
nominee or may distribute his votes among as many nominees as he sees fit. As
indicated on page 1 of this Proxy Statement, if the election of directors is by
cumulative voting the persons appointed by the accompanying proxy intend to
cumulate the votes represented by the proxies they receive and distribute such
votes in accordance with their best judgment. Those nominees receiving the
largest number of votes for the director positions to be filled will be elected
to those positions. Abstentions will be deemed to be present for the purpose of
determining a quorum for the meeting, but will be deemed not voting on the
issues or matters as to which the abstention is applicable.
So far as the management is aware, no matters other than those outlined in
this Proxy Statement will be presented to the meeting for action on the part of
the shareholders.
FERRO CORPORATION
MARK A. CUSICK, Secretary
March 19, 1998
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FERRO CORPORATION THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Ferro Corporation hereby appoints A. C.
Bersticker, H. R. Ortino and M. A. Cusick, the Proxies of the undersigned to
vote the shares of the undersigned at the 1998 Annual Meeting of Shareholders of
the Corporation and any adjournment thereof upon the following:
THE BOARD OF DIRECTORS RECOMMENDS VOTES BE CAST FOR PROPOSALS 1, 2, AND 3.
(1) ELECTION OF DIRECTORS: Albert C. Bersticker, Michael H. Bulkin and William
J. Sharp for terms expiring in 2001.
[ ]FOR all nominees (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees
(INSTRUCTION: If you wish to withhold authority to vote for any
individual nominee, strike a line through the
nominee's name in the list above.)
(2) PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION OF FERRO TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 150,000,000 TO 300,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION OF THE DESIGNATION OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
(Continued, and to be signed on other side)
(Continued from other side)
PROXY NO. SHARES
IF NO INSTRUCTION IS INDICATED, AUTHORITY IS GRANTED TO CAST THE VOTE OF THE
UNDERSIGNED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR PROPOSALS 2
AND 3.
Dated ________________, 1998
----------------------------
Signature
----------------------------
Signature if held jointly
NOTICE: When signing as
attorney, executor,
administrator, trustee or
guardian, please give your
full title as such. A proxy
given by a corporation
should be signed in the
corporate name by the
chairman of its board of
directors, its president,
vice president, secretary,
or treasurer.
PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
Proxy Card
<PAGE> 32
CONFIDENTIAL VOTING INSTRUCTIONS
REGARDING PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FERRO CORPORATION
TO: THE TRUSTEE OF THE FERRO CORPORATION SAVINGS AND STOCK OWNERSHIP PLAN (THE
"SSOP")
Pursuant to the terms of the Ferro Corporation Savings and Stock Ownership
Master Trust Agreement and the SSOP, I the undersigned, as a participant or a
beneficiary and a named fiduciary under the SSOP, hereby direct the Trustee to
vote:
(i) the shares of Ferro Corporation Stock ("Company Stock") allocated to
my accounts under the SSOP on the record date; and
(ii) the proportionate amount of Company Stock which is held in the
Suspense Fund and which is allocated to the accounts of other participants
and beneficiaries but for which no voting instructions are received in a
timely fashion.
at the Annual Meeting of Shareholders of Ferro Corporation on April 24, 1998,
and at any adjournment thereof, in the manner specified below.
THE BOARD OF DIRECTORS RECOMMENDS VOTES BE CAST FOR PROPOSALS 1, 2 AND 3.
(1) ELECTION OF DIRECTORS: Albert C. Bersticker, Michael H. Bulkin and William
J. Sharp for terms expiring in 2001.
[ ]FOR all nominees (except as marked to the contrary) [ ] WITHHOLD
AUTHORITY to vote for all nominees
(INSTRUCTION: If you wish to withhold authority to vote for any
individual nominee, strike a line through the
nominee's name in the list above.)
(Continued, and to be signed on other side)
(Continued from other side)
(2) PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION OF FERRO TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 150,000,000 TO 300,000,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) RATIFICATION OF THE DESIGNATION OF KPMG PEAT MARWICK L.L.P. AS INDEPENDENT
AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
IF NO INSTRUCTION IS INDICATED, AUTHORITY IS GRANTED TO CAST THE VOTE OF THE
UNDERSIGNED FOR THE ELECTION OF THE DIRECTORS AND FOR PROPOSALS 2 AND 3.
Dated , 1998
------------------
----------------------------
Signature
Please Mark, Sign, Date and
Return the Voting
Instructions Promptly using
the Enclosed Envelope.
PLEASE MARK, SIGN, DATE AND
RETURN THE VOTING INSTRUCTIONS
PROMPTLY USING THE ENCLOSED
ENVELOPE.
Confidential Voting Instructions
<PAGE> 33
PARTICIPANT NOTICE
FERRO CORPORATION SAVINGS AND STOCK OWNERSHIP PLAN
March 19, 1998
Dear Plan Participant:
The enclosed Proxy Statement and Confidential Voting Instructions have been
furnished by Ferro Corporation in conjunction with the Annual Meeting of
Shareholders of Ferro Corporation to be held on April 24, 1998, to elect
directors and to conduct other business.
While only the Trustee of the Ferro Corporation Savings and Stock Ownership
Plan (the "SSOP") can actually vote the shares of Ferro Corporation stock
("Company Stock") held in the SSOP, you, as a participant or a beneficiary with
Company Stock credited to your SSOP accounts as of February 24, 1998, (the
record date for the annual meeting) and a named fiduciary under the SSOP, are
entitled to instruct the Trustee of the SSOP with respect to the following:
(1) The voting of Company Stock allocated to your SSOP accounts on the
record date;
(2) The voting of a pro-rata portion of Company Stock (based upon the
ration of the amount of Company Stock in your accounts and the total amount
of Company Stock in the SSOP) allocated to the SSOP accounts of other
participants and beneficiaries for which no instructions are received; and
(3) The voting of Company Stock held in the Suspense Fund of the SSOP.
Accordingly, please review the enclosed information carefully and complete
the Voting Instruction Form and return it to the Trustee by April 21, 1998.
If your voting instructions are not timely received, the Trustee will vote
the Company Stock allocated to your SSOP accounts, uninstructed Company Stock,
and unallocated Company Stock, in the aggregate in accordance with timely
instructions received from other SSOP participants acting as named fiduciaries
under the Plan. If the Voting Instruction Form is received after the close of
business on April 21, 1998, the Trustee cannot ensure that your voting
instructions will be followed.
It should be noted that your instructions to the Trustee are strictly
confidential. Under no circumstances will the Trustee or any of their agents
disclose to Ferro Corporation or any other party how, or if, you voted. The
Trustee will supervise and control the mailing of all materials to SSOP
participants and the receipt of all Voting Instruction Forms and will not
disclose to any outside party the name and address of any SSOP participant. You
may, therefore, feel completely free to instruct the Trustee to vote these
shares in the manner you think best.
TRUSTEE OF THE FERRO CORPORATION
SAVINGS AND STOCK OWNERSHIP PLAN
